Airbnb on the Brink in Taiwan

Changes in regulatory approaches are expected to cut deeply into the home sharing platform’s Taiwan business.

Home sharing is a great way to experience Taiwan. During my two trips last year to Kinmen, the Taiwan-governed archipelago off the coast of China’s Fujian Province, I stayed in the same bed and breakfast, Shangheryuan. In between sightseeing excursions, I chatted with my host Chen Shu-chen, a Taichung native, about everything from where to catch the best view of the Xiamen skyline to the mercurial fog that sometimes descends over the islands.

When the fog is thick, flights are cancelled. Her advice: choose flights early in the day so you can hop on a later one if there is a cancellation.

Chen’s culinary prowess even made me reconsider my misgivings about youtiao, the deep-fried Chinese dough sticks. She paired them with the best fish congee I’ve ever tasted. If there ever is a campaign to make carbs great again, she should be involved.

Shangheryuan is a licensed bed and breakfast listed alongside major hotels on several travel booking sites serving the Taiwan market. Ironically, despite its focus on close contact between host and guest, the inn is not listed on Airbnb, known for “home-sharing.”

In fact, many of Airbnb’s listings appear to be vacant studio or one-bedroom apartments in downtown Taipei City. The owners, who live elsewhere and rent the apartments out for a few nights at a time, are not engaged in “home sharing” any more than any landlord who leases a property to a long-term tenant.

Therein lies the regulatory dilemma: How to support innovation – of which the sharing economy is a prime example – without being unfair to existing stakeholders such as hotels?

Taiwanese law does not typically permit private residences to be rented out for less than 30 days at a time. Since 2015 the government has been promising to crack down on illegal hotels, but progress has been slow. Given substantial demand in Taiwan for short-term accommodations, some analysts expect that the government will follow the Japanese example and legalize home sharing – but with strings attached.

In 2015, Taiwan passed an amendment to the Tourism Development Act that more clearly defined hotels and raised fines on operators of illegal short-term tourist accommodations to as much as NT$500,000. Yet in practice, relatively few fines have been issued, according to sources who follow the industry.

One challenge for regulators is that an Airbnb listing is not required to list its exact address. A guest often only learns that information after paying and contacting the host directly. “Someone living in a building would have to report one of their neighbors to the authorities, and not everyone wants to take that responsibility,” says Lawrie, a long-term Taiwanese Airbnb host who asked to be identified only by his English name.

In December 2015, the Taipei City government ordered Airbnb to remove 95% of its 4,200 short-term home rental listings. That scared some additional people off of Airbnb.

But the fear must have subsided. There are currently hundreds – if not thousands – of Taipei apartments available for short-term rentals on Airbnb. Certainly many visitors to Taipei are seeking comfortable downtown accommodations for a lower price than a comparable hotel room and don’t care about interaction with a host. “It’s attractive to guests but not fair to hotels that have much higher costs and must abide by strict regulations,” Lawrie notes.

Airbnb did not respond to requests for information, but an August report in Tech Node said the company’s Taiwan business has surged since 2015. Citing company data, it said 1.3 million foreign tourists – 12% of the total – used Airbnb Taiwan listings in 2017.

But some industry experts raise doubts about the future prospects. Chen Ming-ming, founder of the Taiwan-based travel-activity platform kkday, notes that the hotel industry, which is already suffering from a supply glut, has stepped up pressure on the government to crack down on Airbnb. Traditional tour operators also oppose Airbnb as its customers bypass them and book their own accommodations.

Not all hoteliers oppose Airbnb. “There’s no direct impact on our business,” says Harvey Thompson, general manager of the five-star W Taipei. Rooms at the W, ranging from NT$10,000 to $15,000 a night, are positioned for the premium market. In contrast, most Airbnb Taipei listings are in the NT$2,000-$6,000 range. Still, residents of apartment buildings may be disturbed by the coming and going of Airbnb guests, Thompson points out.

Tourism Bureau crackdown

This June, the Tourism Bureau launched a campaign against unlicensed accommodations which will reportedly include comprehensive inspections of suspected illegal hotels. “While tourists may want inexpensive accommodations, there are many problems associated with illegal hotels and short-term rentals,” including safety issues, tax avoidance and disruptive behavior of guests in residential buildings, the Bureau said in an emailed response to a request for comment from Taiwan Business TOPICS. For those reasons, such accommodations have been banned worldwide, and “internet platform operators should abide by Taiwan’s regulations on hotels and short-stay rentals,” the Bureau added.

In July, local media reported that the Tourism Bureau cut the utilities at an unlicensed property in Kaohsiung’s Zuoying District after the owner failed to heed an order to cease operations.

Lawrie points to Taiwan’s low salary levels as the reason many people seek to supplement their earnings with income from Airbnb rentals. A typical Airbnb listing of a whole apartment in downtown Taipei could bring in NT$30,000-$40,000 a month, which can make a big difference for someone earning just NT$40,000 (the approximate median salary) from a full-time job, he says.

One Airbnb host based in northern Taiwan, speaking on condition of anonymity, said he has listed a central Tainan property on Airbnb since 2014 to fill gaps in occupancy by a regular tenant. “Demand is strong enough to make it worth listing,” he says.

The host admits that the property isn’t licensed as a hotel. “Can anything on Airbnb be licensed in Taiwan?” he asks.

A bed-and-breakfast in Kinmen. Photo: Matthew Fulco

The technical answer is “yes.” But most of those licensed bed-and-breakfasts, like Kinmen’s Shangheryuan, already are partnering with other travel-booking sites that have been established in this market for longer than Airbnb and are less likely to work with unlicensed operators.

At the same time, Lawrie acknowledges that real-estate speculation has played a large role in Airbnb’s success in Taiwan. “Some people in Taiwan still see real estate as a way to get rich fast,” he says. “It’s a part of our culture that’s not easy to change.”

In practice, the hosts able to post the most lucrative earnings from Airbnb listings most likely already possess substantial assets. For instance, a host with five Airbnb listings in Taipei’s Xinyi and Daan districts could earn up to NT$150,000-$200,000 a month, Lawrie says, but would have needed the capital to acquire the properties in the first place. The most desirable apartments are in modern high-rises, where units rarely sell for less than NT$15-20 million.

Some in the tourism industry urge the government to revise hotel regulations to better accommodate home sharing. “It would be beneficial to consumers if home sharing [including empty apartments] was legalized here – there’s a huge demand for it,” says C.K. Cheng, founder and chief executive officer of AsiaYo, a Taipei-based booking site for licensed vacation rentals.

Japanese model

Taiwan reportedly is looking at Japan’s home-sharing act, passed in June, as a possible model. Under that law, individual rooms can be rented out for a maximum of 180 days a year, and hosts are required to verify the identity of their guests and keep a guest registry. Ahead of the law coming into effect, about 40,000 Airbnb listings (80% of the total) that would lack permission to operate under the new legislation vanished from the platform.

Cheng lauds Japan’s move to regulate home sharing. “Sure, there will be some transitional pain, but now the government can monitor the industry,” he says. That will strongly reduce safety and tax problems, as well as conflicts between guests and hosts or guests and residents of a building, he adds.

An August Bloomberg commentary said that the new regulations are professionalizing Airbnb in Japan. “Gone are the stock photos of tourist sites and blurry smartphone pictures that leave you wondering what the place actually looks like,” the article said. “Every listing now also displays a registration number with the local government and they will keep a copy of your passport.”

With the 2020 Tokyo Olympics approaching, Japan had good reason to boost accommodation options for visitors. The country already faces a shortage of hotel rooms amid an unprecedented tourism boom. Indeed, by some accounts Japan is the world’s fastest growing tourism destination. In 2017, 28.7 million foreign tourists visited Japan, an increase of 334% since 2010, according to the United Nations World Tourism Organization.

In contrast, Taiwan’s tourism boom, fueled by a surge of Chinese tourists during Ma Ying-jeou’s presidency, is over, at least for now. Since 2015, overall Chinese tourism has fallen by about 40% from a high of 4 million arrivals. The primary reason for the decline is Beijing’s tightened restrictions on group tours to Taiwan (the independent traveler market from China remains robust). Even if tourism from other markets is stable or growing, it is difficult to make up for the precipitous fall in the number of Chinese group tours. Last year, Taiwan’s inbound tourism revenue decreased about 8% to US$12.3 billion.

Compared to Japan then, Taiwan’s tourism market is currently in a very different situation. And while Airbnb often depicts itself as an insurgent in a battle with an entrenched incumbent, the hotel industry, there is another party that benefits from short-term rentals: the real-estate sector. Given sufficient demand, property owners can earn more from renting out apartments to short-term guests than to long-term tenants.

Lawrie says he expects the Taiwan government to crack down hard on unlicensed short-term rentals over the next two years. He expresses hope that Airbnb can return to its roots as a home-sharing platform that allows people with an adventurous spirit to connect. After all, not everyone is comfortable staying with a stranger in that person’s home or hosting a stranger. And there’s no way to make a connection with an absent host.

“If you ask me, home sharing just might be the best way to make new friends,” he says. “It’s how I met my wife. She was my Airbnb guest.”

Taiwan Business TOPICS

Taiwan Business TOPICS is published monthly by the American Chamber of Commerce in Taipei, and covers current topic affecting business conditions in Taiwan, an Industry Focus section on a particular industrial sector, and other reports prepared by the magazine’s staff of experienced professional journalists.